Apple’s iPad Pro goes on sale today for a list price of $799. But wait there is more. You can spend $169 more for a keyboard that turns it into a laptop. And you can spend another $99 to get its Pencil. These are optional add-ons. There is no Apple bundle that offers iPad plus keyboard or all three at a lower price than the sum of individual products. What if Apple offered one or both these bundles?
- Bundle 1: iPad, Keyboard and Pencil for $999 (a $69 discount )
- Bundle 2: iPad with Keyboard for $919 (a $49 discount)
It doesn’t and it won’t. Why is that?
Before we go into this I want to remind you why a product manager should consider product bundling. I wrote this while back on bundling,
pricing a bundle is not a straightforward answer. A marketer needs to know the demand schedule, customer preferences, customer segments, and value add from bundling. The correct price is the one that maximizes profit
Regarding two possible bundles, let us knock out one right away. It is the iPad plus Keyboard bundle. This simply could have been achieved by pricing the keyboard at $129 vs. $169. The keyboard has no standalone purpose and works only with iPad Pro. So a bundle at lower price is exactly same as a lower priced keyboard.
There is no reason for Apple to bundle or drop price because it understands well the customer segment that prefers the keyboard, why they choose the keyboard and what the customers are willing to pay. Dropping the price may increase volume but at the expense of profit. If we assume 50% gross margin on the keyboard (highly likely number given Apple’s track record), Apple will have to sell twice as many keyboards $129 to make same profit as $169 keyboards. That does not fit its pricing philosophy or strategy.
If you see the logic of this simple bundle it is not difficult to see why a full bundle of all keyboard and Pencil doesn’t make sense either. Additionally the segment that prefers Pencil does so for very specific use case and that does not apply to most who prefer a keyboard. So a bundle price will need to so low to appeal to both segments to generate any incremental volume, meaning even lower total profit than selling them unbundled.
In simple terms, no customer demand or economic preconditions exist to create iPad Pro bundles. Apple’s product management team took the simpler and favorable approach of selling the add-ons to maximize profit.